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Morning Market Review for April 23, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Technical selling sends grains lower. (Comments are updated by 7:30 a.m. Central Time.)

But corn, soy, and wheat are all slated to post weekly gains on record rallies

  • Corn down 5-7 cents
  • Soybeans down 5-12 cents, soyoil up $0.10/lb, soymeal down $2.50/ton
  • Wheat down 1-5 cents

*Prices as of 6:50 am CDT.

Happy Friday! May options expire today, which led to a flurry of buying in yesterday’s trading session as option sellers bought futures contracts to offset their short option positions. May futures contracts move into delivery next Friday, April 30.

Chicago corn futures closed up the limit in yesterday’s trading session as cool weather continues to fuel concerns about slow germination rates and planting delays across the Heartland – which would invariably lead to few acres planted this year when supplies are already forecast to be the sixth-tightest on record. Revived ethanol production also supported yesterday’s eye-popping gains as ADM ethanol plants in Cedar Rapids, Iowa and Columbus, Nebraska come back online after idling during the pandemic.

To accommodate the increasingly volatile market conditions, the Chicago Board of Trade announced yesterday afternoon the daily limit for corn would be increase from its typical $0.25/bushel to $0.40/bushel for today’s trading session.

CBOT also announced corn futures maintenance margins would increase by $200 to $1,700 for May 2021. Similarly, margin requirements for soybean trades will increase by $475 per contract to $3,825. The Minneapolis Grain Exchange also announced yesterday afternoon it would raise its maintenance margin on spring wheat contracts by $500 to $1,900 per contract for May and July 2021 futures.

The long and short of it: buckle up for another wild day of trading in the grain markets, sports fans!

Corn

Profit takers swooped into the corn complex overnight, taking advantage of yesterday’s limit up trading gains and sending prices $0.05-$0.10/bushel lower. Warmer temperatures across the Midwest and Plains today will encourage planting and germination progress, which the crop – and farmers – desperately needs. Even with lower prices today, the corn complex is still slated to post another weekly gain as prices rise to the highest level in eight years on planting concerns.

Cattle prices have been on a steady decline over the past two weeks, but monthly Cattle on Feed data released today by USDA is expected to show rapid expansion as the beef industry gears up for summer grilling seasons. March 2021 placements are likely to see an astounding 33.7% rise from a year ago, though data from March 2020 was largely influenced early pandemic supply chain issues, the most significant of which being closed meat processing plants.

Placements for last month are expected to range between 1.99 million – 2.23 million head, with an average guess of 2.08 million head. Total Cattle on Feed inventory levels are expected to come in around 12.59 million – 12.88 million head as of April 1, with an average increase of 6.1% over April 1, 2020 volumes expected by trade analysts.

Cattle marketings for March 2021 are expected to remain relatively consistent with levels a year ago, which is fitting as slaughterhouses did not fully feel the impact of pandemic labor shortages until April 2020, when multiple plants were forced to close to combat COVID-19 outbreaks among staff. Market analysts expect the total number of animals sold for slaughter during March 2021 to only be 0.5%-1.6% higher than year-ago levels for an average guess of 2.03 million head.

The world’s sixth largest corn exporter will likely bulk up its exportable supplies this year. South Africa is likely to produce 646.7 million bushels of corn for the 2020/21 marketing year, a 7% increase from last year’s output due to favorable crop conditions during the current growing season.

Soybeans

Soybeans followed the rest of the grains complex lower as profit-taking took the top off the complex’s earlier seven-year high set in yesterday’s trading session. Soybeans are still on track to see the largest weekly price increase since May 2019.

Dwindling cooking oil stocks across the U.S. could slow renewable fuel production in the coming days. But oil refiner Valero announced an expansion of its St. Charles, Louisiana facility that will increase renewable biodiesel production to the tune of 400 million gallons annually. The news comes just days after Cargill announced a joint venture with Love’s to build a renewable biodiesel plant in Hastings, Nebraska.

Biodiesel production has proven to be exceptionally profitable for energy companies. Valero reported $203 million in operating income during 2021’s first quarter – a new record high. "The biggest advantage is the carbon intensity score of those oils, those waste oils, compared to a veg oil or compared to the soybean oil in most jurisdictions," Valero’s senior vice president of alternative fuels, Martin Parrish, told participants on Valero’s first quarter earnings call yesterday.

Wheat

Chicago and Minneapolis wheat prices remained steady over $7/bushel despite a round of technical selling that pushed prices in the wheat complex $0.01-$0.05/bushel lower overnight. Rains in the Southern Plains left Kansas City wheat futures trading between $6.65-$6.78/bushel.

Even with the overnight losses, the wheat complex is still likely to see its largest weekly rise since May 2019 after this week’s eye-popping rally, due in large part to lower forecasts for 2021 Russian production. A weaker dollar capped the morning’s losses.

Cold weather damage to France’s soft winter wheat crop continues to largely remain a mystery – for now – to the markets. Despite a cold snap several weeks go that raised concerns about frost damage to winter grain crops, the French farm office, FranceAgriMer, only reported a 1% weekly decline in crop ratings for the week ending April 19.

About 85% of the French soft wheat crop is rated in good to excellent condition. But similar to cold weather damage to the U.S. crop, the true extent of damage known will not likely be fully realized until combines start rolling later this summer.

Weather

Temperatures in the Northern Plains today will likely remain on the chilly side, but it is likely to be a warmer day across the rest of the Heartland, which will warm at least into the 60s today, allowing soil temperatures to warm to more conducive conditions for plant germination, according to NOAA’s short-range forecasts.

Rain showers will move east across the Southern Plains and Upper Mississippi River Valley today, with a strong chance of showers likely to hit the Eastern Corn Belt by tomorrow. The heaviest accumulation will likely be focused in the Southern Plains, so farmers receiving showers in the Heartland will not likely be rained out of fields for very long. The rain system is likely to move out of the Midwest by Sunday afternoon, however by that time a snow system will move into the Northern Plains.

Dry conditions continue to persist in the Great Lakes States, Northern Plains, and West according to the most recent Drought Monitor released yesterday from the University of Nebraska. Just under 65% of the U.S. cropland is listed in some form of abnormally dry to exceptional drought condition as of Tuesday.


042321droughtmonitor.jpeg

Financials

Coronavirus cases in the U.S. rose by 67,284 cases from yesterday to 31,930,271 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 942 lives to 570,346 deaths as of press time

A recent farmland sale in Iowa recently featured a winning bid that reached $18,800/acre. Farm Financial Strategies associate Mike Downey points out that on the heels of record government payments in recent years, the latest commodity price boom and low interest rate environment has created a competitive atmosphere for farmland purchases.

In the latest More than Dirt column, Downey compares the latest cycle to previous trends over the past 50 years. “Ironically, it was 7 to 8 years ago when commodity prices, land values and cash rents were last setting new highs,” Downey observes. “It seems history may be repeating itself and the ag industry is poised for another bull market cycle.”

A recent Farm Futures survey found that farmers have a wide array of views on potential carbon reduction programs that would pay farmers to engage in climate-friendly practices. As executive editor Mike Wilson reports, 71% of farmer respondents in the March 2021 survey had some degree of support for potential climate-friendly practices.

“Yet, even those who mostly supported the idea had reservations,” Wilson analyzes. “One supporter said his support was impacted by ‘a general distrust of government.’ In fact, several supporters said they had reservations based on government involvement.”

Farmers continue to be curious about a potential carbon sequestration policy but would like a more active role in shaping the conversation. “[I] would like to see some rules and regulations as to how the exchanges will work,” one farmer shared.

U.S. stock markets inched up in the overnight trading session, buoyed by the lowest weekly job claims report since the pandemic started, as released yesterday. But trading continues to be mostly sideways for the major indices as recovery progress battles against rising global COVID-19 cases, especially a double-mutation variant in India that threatens to slow global economic recovery rates. S&P 500 futures edged 0.19% higher at last glance to $4,135.50.

Morning Ag Commodity Prices - 4/23/2021
Contract Units High Low Last Net Change % Change
MAY '21 CORN $ / BSH  6.545 6.3825 6.4525 -0.0525 -0.81%
JUL '21 CORN $ / BSH  6.35 6.1925 6.2625 -0.0525 -0.83%
SEP '21 CORN $ / BSH  5.7825 5.6625 5.7225 -0.05 -0.87%
DEC '21 CORN $ / BSH  5.53 5.4275 5.47 -0.0625 -1.13%
MAR '22 CORN $ / BSH  5.58 5.4775 5.52 -0.0625 -1.12%
MAY '22 CORN $ / BSH  5.61 5.5075 5.5075 -0.105 -1.87%
JUL '22 CORN $ / BSH  5.6075 5.515 5.5275 -0.0875 -1.56%
MAY '21 SOYBEANS $ / BSH  15.3925 15.225 15.29 -0.0425 -0.28%
JUL '21 SOYBEANS $ / BSH  15.1975 15.03 15.09 -0.0525 -0.35%
AUG '21 SOYBEANS $ / BSH  14.7 14.54 14.5925 -0.0625 -0.43%
SEP '21 SOYBEANS $ / BSH  13.83 13.6725 13.7425 -0.06 -0.43%
NOV '21 SOYBEANS $ / BSH  13.4 13.2425 13.2925 -0.09 -0.67%
JAN '22 SOYBEANS $ / BSH  13.3725 13.225 13.2725 -0.0825 -0.62%
MAR '22 SOYBEANS $ / BSH  13.09 12.965 13.01 -0.0775 -0.59%
MAY '22 SOYBEANS $ / BSH  13.01 12.8925 12.9175 -0.09 -0.69%
JUL '22 SOYBEANS $ / BSH  12.9375 12.8675 12.8675 -0.1 -0.77%
MAY '21 SOYBEAN OIL  $ / LB 63.5 62.31 62.7 0.18 0.29%
JUL '21 SOYBEAN OIL  $ / LB 59.74 58.53 58.87 -0.08 -0.14%
MAY '21 SOY MEAL $ / TON 421.2 416.5 419.8 -2.2 -0.52%
JUL '21 SOY MEAL $ / TON 424.7 419.7 422.8 -2.5 -0.59%
AUG '21 SOY MEAL $ / TON 421.1 416.5 419.7 -2 -0.47%
SEP '21 SOY MEAL $ / TON 414.7 411.1 413.6 -2 -0.48%
OCT '21 SOY MEAL $ / TON 407.3 403.5 403.7 -4.2 -1.03%
MAY '21 Chicago SRW $ / BSH  7.1325 7.01 7.0625 -0.04 -0.56%
JUL '21 Chicago SRW $ / BSH  7.1325 7.0125 7.0625 -0.0425 -0.60%
SEP '21 Chicago SRW $ / BSH  7.125 7.0025 7.05 -0.0475 -0.67%
DEC '21 Chicago SRW $ / BSH  7.1425 7.02 7.06 -0.0575 -0.81%
MAR '22 Chicago SRW $ / BSH  7.1675 7.04 7.0725 -0.07 -0.98%
MAY '21 Kansas City HRW $ / BSH  6.695 6.6075 6.66 -0.015 -0.22%
JUL '21 Kansas City HRW $ / BSH  6.77 6.68 6.7325 -0.015 -0.22%
SEP '21 Kansas City HRW $ / BSH  6.8225 6.74 6.79 -0.0125 -0.18%
DEC '21 Kansas City HRW $ / BSH  6.8975 6.8125 6.865 -0.01 -0.15%
MAR '22 Kansas City HRW $ / BSH  6.9575 6.89 6.925 -0.0275 -0.40%
MAY '21 MLPS Spring Wheat $ / BSH  7.1275 7.0425 7.0525 -0.0325 -0.46%
JUL '21 MLPS Spring Wheat $ / BSH  7.2 7.1075 7.1325 -0.015 -0.21%
SEP '21 MLPS Spring Wheat $ / BSH  7.2525 7.165 7.17 -0.0375 -0.52%
DEC '21 MLPS Spring Wheat $ / BSH  7.29 7.2175 7.2325 -0.015 -0.21%
MAR '22 MLPS Spring Wheat $ / BSH  7.31 7.2625 7.31 0.0325 0.45%
JUN '21 ICE Dollar Index $ 91.285 90.975 90.98 -0.341 -0.37%
 JU '21 Light Crude $ / BBL  62.12 61.35 61.73 0.3 0.49%
 JU '21 Light Crude $ / BBL  61.98 61.23 61.65 0.31 0.51%
MAY '21 ULS Diesel $ /U GAL 1.875 1.8589 1.8675 0.0067 0.36%
JUN '21 ULS Diesel $ /U GAL 1.8769 1.8598 1.8714 0.0085 0.46%
MAY '21 Gasoline $ /U GAL 1.9934 1.9767 1.987 0.0123 0.62%
JUN '21 Gasoline $ /U GAL 1.9995 1.982 1.9927 0.0116 0.59%
APR '21 Feeder Cattle $ / CWT 0 #N/A 132.25 0 0.00%
MAY '21 Feeder Cattle $ / CWT 0 #N/A 137.025 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 118.325 0 0.00%
 JU '21 Live Cattle $ / CWT 0 #N/A 115.85 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 107.45 0 0.00%
JUN '21 Live Hogs $ / CWT 0 #N/A 103.55 0 0.00%
APR '21 Class III Milk $ / CWT 17.63 #N/A 17.65 0 0.00%
MAY '21 Class III Milk $ / CWT 18.56 18.56 18.56 -0.12 -0.64%
JUN '21 Class III Milk $ / CWT 18.76 18.66 18.66 -0.16 -0.85%
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